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The Martha Stewart Case

The trial of American businesswoman Martha Stewart is shortly about to get underway. I am, on the basis of what I have read about the charges brought against her, unconvinced she was guilty of insider trading, and in fact deeply disturbed that prosecutors have chosen to go ahead with this case on the basis of what looks like thin evidence, as described in detail in this article in Reason magazine.

I have a problem with insider trading as it is defined by lawmakers in the United States, Europe, and in certain other parts of the world. In all too many cases, insider trading is so loosely defined that any entrepreneur with a quick dialing finger and fast ability to spot information – surely a praiseworthy thing – could, according to some definitions, be found guilty of insider trading. Insider trading has become rather similar to anti-trust in this regard, in that capitalist-bashing lawmakers can use it to cut down the successful.

I do not see any relief coming soon from our legislators. Insider trading is often a way for politically ambitious legislators and public prosecutors to make a name for themselves. And even in those cases where a chief executive or other senior business person has acted wrongly, one usually finds that the act in question amounted to fraud, theft or some other crime already covered in company and in our existing Common law. For example, if say, CEO Fred Smith uses information obtained in secret and in a way that violates his own company’s rules, he should be sacked for breaking company rules and the terms of his contract. No broader insider trading law is necessary.

Also, there is no reason why, for example, a market like the Nasdaq exchange could not stipulate that all listed firms adhere to certain standards of corporate behaviour. Exchanges which let companies do what they want may have to pay a “reputational price” in that some investors will choose to migrate to more upright exchanges. This happens to a certain extent already, because stock exchanges in countries with loose regulations and opaque reporting standards – as has been the case in parts of Latin America, for example – lose out to exchanges like the Dow Jones our own FTSE. In fact, globalisation is forcing a “race to the top” in terms of corporate behaviour as stock market leaders around the world seek to attract capital. The market wins again. (By the way, the collapse of Italian food group Parmalat has helped underscore the reputational damage to a whole country – in this case Italy – when a firm is thought to have behaved wrongly).

On a more economically theoretical basis, insider trading, even if one could definite it clearly, usually poses no actual “harm” either to the broader investor if one accepts that capital markets are typically highly efficient in these days, when price anomalies are usually exposed in seconds in this electronic age.

Time to put insider trading laws under the spotlight, and hopefully, in the dustbin.

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31 comments to The Martha Stewart Case

  • Front4uk

    Whoa there Pointdexter, the insider trading laws are there for good purpose – to protect the existing shareholders and establish trust between companies and investors in the marketplace – without that trusts the precious free market we all like will cease to function. Insider trading is not a victimless crime, look at Enron for example, Jeff Skilling and Andy Fastow were dumping Enron stock like no tomorrow before the end and the muppets who bot it ended up paying the bill.

    For market efficiency , that’s for 1st year uni students and the lumpeninvestoriat who roll the dice and buy amazon.com at $400 per share. It’s a zero sum game and someobody has to pay – and it will probably be you. The marketplace has incomplete information and irrational investors making decisions, etc etc.

    For price arbitrage , yes the markets are broadly efficient but there’s still small discrepanices which can be exploited – you just have to deal in size. 40% of NYSE volume comes from program trading and good chunk of that is the cash leg of index arb trade.

  • Verity

    Agree. Insider trading needs to be much more clearly defined. Certainly, someone offloading tens of thousands of useless shares onto innocent buyers in the knowledge that a company is about to crash should be an offence because it robs the market of its neutrality and hurts innocent traders.

    But hearing that your company is going to be taken over and hastily buying yourself 10,000 shares on margin? I don’t see how that hurts anyone.

  • Johnathan Pearce

    Front4uk, you kind of missed one of my points, namely, that the sort of stuff done by Enron execs was illegal anyway under existing law. The company execs committed acts of fraud and outright theft.

    The point of my article was not to excuse corporate wrongdoing, including shenanigans such as those of Enron, WorldCom and the rest, but rather to question the logic of insider trading laws, given the difficulty of defining what such trading is. There seems to be a very grey area between criminality and fast-acting market trading.

    To repeat, I am all in favour of firms setting their own high codes of behaviour, including share dealing, and for investors voting with their feet in favour of well-behaved firms.

    At the core of the insider trading issue is the notion of whether there is such a thing as “privileged information”, such as when a company exec who knows of an upcoming event affecting his firm sells/buys stock ahead of said event. I have a real problem with this issue because in any real market, as opposed to a totally transparent one, information is always going to be better for some economic actors than others.

    If markets were perfectly fair, then we would have omnescient knowledge and therefore would not need markets in the first place, but could use socialist central planning. That’s the Austrian critique of socialism in a nutshell.

  • There is insider trading and insider trading.

    Some I think is unethical and some I think is fine. But its difficult to define and delineate the cases. As a guide, if you would be embarrassed if it became public knowledge, its probably wrong. You can’t really legislate on that basis.

    As for stock markets being efficient, you have to be joking, only academics believe that… Panic prone, manic markets seem far from efficient to me.

    P.S. Minor point Johnathan, when you say “lose out to exchanges like the Dow Jones our own FTSE” you mean the New York Stock Exchange and the London Stock Exchange, rather than publishers indicies.

  • sojourner88@hotmail.com

    Jonathan is right. Frankly, I think it’s mean spirited to say that someone who knows his company’s about to introduce a revolutionary new product, or is about to be taken over, shouldn’t be able to capitalise on his/her knowledge and go out and make a little bundle. Why not?

    Life’s not fair. Some people are born rich. Some born very clever. Some exceptionally good looking. All of these are “unfair” advantages.

    Insider trading that damages other people or damages or brings into disrepute the system should of course be against the law. But regulating against human nature is repressive. That person who knows a product that will revolutionalise the market is going to be launched will make his quick little bundle, and then – it being a free gift, so to speak – will immediately go out and spend it, spreading the benefit around.

  • Matthew O'Keeffe

    I’m with you “Mr Pearce”. Excellently and concisely argued.

    In my ten years as a stock analyst, I was was investigated for insider dealing four times! On one occasion, in 1993, my colleague had called me from a taxi on his way back from a meeting with P&O (which analysts from all the major houses had attended). My colleague informed me that the meeting had been a disaster, the Chairman had been very downbeat, had failed to address any of our concerns, etc. I jumped on the microphone and spoke to the 500 guys on our floor advising them to tell their clients to sell the stock which then fell 50p! I got a call later that afternoon asking what had been said and what I had known. Most of the time it is, as you say, fast-acting market trading which attracts the attention of the Financial Services Gestapo. On this occasion, as in many others, I knew nothing outside the public domain about the stock.

  • Veeshir

    She’s not being prosecuted for insider trading. She’s being prosecuted for claiming she’s innocent. “Giving false and misleading statements.” They’ve
    trimmed the ‘misleading’ from the indictment though.
    It looks more and more like prosecutorial malice.

  • Johnathan Pearce

    Paul Staines, on the publisher’s point, I meant that actual physical exchange.

    The efficient market point. Well, in the short-run, markets do “overshoot”, of course. They are driven as much by crowd behaviour, panics, greed and ignorance as by anything else. However, if a share price is “unfairly” moved by “insider trading” then in most cases I can think of, arbritageurs will use this as an opportunity to sell/buy.

    On a particular note, an old friend of mine, who used to be a futures dealer at the old outcry LIFFE exchange in London would refuse to deal with German banks just before a German govt statistics release because of all the leaking going on of official data out of Germany. The price action just ahead of a release point was often very bizarre, and the market traders quickly would correct it.

  • Tim Sturm

    I agree, market rules should be determined by markets themselves. Insider trading rules (as well as takeover rules, disclosure requirements, etc) should be set through company charters and/or stock exchange listing rules.

    As Jonathan says, if rules were determined by the market then there would be a variety of “regulatory” regimes on offer, with each person self-selecting into the desired regime.

    (This would, incidentally make discussions like this one about the alleged need for a particular rule largely redundant. Those who disagree can just put their money where their mouths are go their separate ways).

  • Agree with Johnathan Pearce.

    A lot of what’s going on here, as with antitrust prosecutions, is that for prosecutors in the U.S. there is little downside to ginning up big cases, valid or not, against famous defendants. The prosecutor receives a huge amount of free publicity that he can later use to run for elected office. Even if he loses the big case, the worst that happens is that he retires from public life and takes a job at a private law firm.

    Rudolf Giuliani is a good example of the ambitious prosecutor who follows this formula. He ran for NYC mayor after making himself famous conducting flashy prosecutions of traders in the 1980s. Many of the convictions he gained were later overturned, but by that time Rudy was already mayor so it didn’t matter.

    A lot of legislators are attorneys and many in the U.S. are ex-prosecutors. It seems unrealistic to expect them to support laws to reduce prosecutors’ incentives to pursue bad cases for political reasons. Still, some structural reform of the U.S. legal system seems warranted. Libertarians have long discussed various possible changes, including privatizing the State’s prosecution functions, but so far nothing has been done. It’s a difficult problem.

  • Ted Schuerzinger


    According to this Reason article, Stewart is being prosecuted (civilly) for insider trading.

    It’s Stewart’s public claims of innocence on this charge that are the grounds for Ashcroft & Co.’s “false and misleading statements” prosecution.

    I’m surprised NY Attorney General Eliot Shitzer isn’t involved in this. God knows he’s perfectly willing to engage in this sort of grandstanding. (Well, all the states’ AGs are. Don’t get me started on the previous NYS AG vs. Procter & Gamble.)

  • YogSothoth

    Clearly, there are problems with defining what ‘Insider Trading’ is but just because a thing is difficult to define doesn’t necessarily mean we should throw up our hands and give up.

    Some say: “One man’t terrorist is another man’s freedom fighter” which points out that in some cases the labels depend upon who is doing the labeling. Fair enough, but this does not mean that “terrorist” is a meaningless word – just that we have to think a bit harder. Here’s my definition:

    Terrorist – One who kills to bring attention to his political cause.

    A freedom fighter directs his energies at those who are actually responsible for his lack of freedom a terrorist is unconcerned with the cultability of his targets. See that wasn’t so hard was it?

    Now, with regard to insider trading, in order for Martha Stewart to sell her stock there had to be a buyer. Do you believe the buyer would have purchased that stock at the price she offered if he’d known what Martha knew at the time she sold it? Probably not and this demonstrates that insider trading is ultimately a form of fraud. In my opinion, the dividing line is based upon access to information. If it is within the power of all players to acquire the information it isn’t insider information – in this case Martha being Sam Waksal’s friend gave her access to the information, a state of affairs I could not replicate unless Mr. Waksal saw fit to accede to a relationship with me that was sufficiently close that he’d share his information with me.

    Matthew O’Keefe has it right above – the information he acted upon was information that was within the power of any stock trader to acquire => no insider trading.

    Certainly there is an element of subjectivity here (one can’t readily build an ‘insider trading detecting machine’) but there is an element of subjectivity in rape accusations as well but our realization of this doesn’t inspire us to cease attempting to prosecute rape cases.

    If y’all are of the opinion that there is no such thing as insider trading you can count me out, its correspondence to the fundamental libertarian precept of being against fraud is too substantive for me to ignore.

  • ed


    Insider trading is very simple to define. If you have information that is not available to the public and you act upon it by engaging directly, or indirectly, then you’re guilty. For those people who want to see how things are without insider trading laws should review the way stocks were traded in the 1920’s. The whole point and purpose of insider trading is to bilk people who do not have that information.

    “But hearing that your company is going to be taken over and hastily buying yourself 10,000 shares on margin? I don’t see how that hurts anyone.”

    You can’t? Then imagine yourself as the person selling that stock. Let’s say that, based on public information, you decide to unload a stock for $10/share. Someone buffoon has insider knowledge that the company is going to be bought out at $14/share. You put the stock up for sale, the buffoon buys the stock. He’s made $40,000 profit, you’ve lost out on making $40,000.

    Still happy?

    Stocks aren’t virtual. They have a discrete and concrete existence. For every stock sold, there’s a buyer. For every stock purchased, there’s a seller. So every time a stock is bought/sold there’s a winner and a loser.

    Do you really think it’s ok to be loser?

  • Matthew O’Keeffe, You got on the horn and told 500 people (and impliedly untold thousands of clients) to SELL on the basis of that one meeting? Now I am truly suspicious of the depth of stock analysts’ reports. Had you been prepping your people that this was a make-or-break meeting and that depending on what the Chairman said, you’d call for a sell or hold? The whole procedure sounds a bit bizarre.

    Obviously it is not insider trading and it sounds odd that anyone would even suspect you based on what you claim here. But what would concern me is the depth of the analysis. No?

  • Limberwulf

    I would tend to agree with Jonathan Pearce and Tim Sturn.
    Ideally a publicly traded company should only allow trading on publicly available information. However, if a company put in their policy the freedom for employees and other insiders to trade based on non-disclosed information, and disclosed that policy, then it would again be the responsibilty of the investor to decide if that company is a worthy investment. True fraud, improper accounting, and false statements are illegal anyway, so there is no real need for a set insider trading policy. Too often it is used as a political tool to bring down a politician or to make a name for another one, the fame issue being far more important than the actual facts of a given case.
    A free market is efficient because it will correct itself, even of unethical or illegal activities. Yes there are some victims, but being in the market beyond your means is a bad decision. People lose money and make money in the market every day, but overall the market stabilizes even the most catastrophic events. I consider that quite efficient. I also cannot think of a single example of a government controlled anything that could claim to be “efficient”. The emotional outrage that “some people lost money” is akin to not allowing cars because “some people have been killed in car accidents”. It sounds great on an emotional level, but this is real life.

  • Sandy P.

    All Waskal (?) had to do was have faith in the treatment and ride it out. None of this would have happened. But he got greedy.

    Treatment was finally approved by the FDA.

    Hit in his stock, but it would have come back.

  • Matthew O'Keeffe

    David Sucher:

    Yes. We had been recommending the stock as a buy for some time, as I recall, but we had been prepping our sales force that P&O had probably run far enough and that, depending on the annual results meeting, we would be looking to change the recommendation from buy to hold. What I said on the horn (as I remember it from 1993) was to take profits. This is one of those soft recommendations which falls somewhere between hold and sell.

    Nonetheless, you raise interesting issues. Most of the time companies issue boring results but occasionally they produce surprisingly bad or good numbers. These are released by Reuters at 07:00 and the analyst is expected to give a quick comment at the 07:30 meeting. Usually the relevant company will host a results meeting later that morning at which point you gain a bit more colour to the results. In the event of surprising results there isn’t the time to produce an indepth report. The procedure may sound bizarre to you (it is a bit bizarre) but try to remember that most traders and some clients will want to know what to do with their holdings by 07:05! A lot of the time, I found that the high drama of a recommendation change had been enacted before people in less bizarre jobs had even got to their office!

    I think the circumstances I have described happen a lot and I do not think it odd that the FSA investigates them. After all, they are not telepathic! They do not know what secrets market participants are carrying so their best bet is to look out for unusually steep price movements.

    Still, you touch on an area of concern. The analyst is, on the one hand, expected to produce weighty tomes and recommendations that are good on a 12 month view. On the other hand, he is not in an ivory tower. I sat on the floor and was also expected to react to market events. It is well-paid but a tough and confused job. I feel able to comment on it objectively since being laid off!

  • Julian Morrison

    Seems to me that insider trading laws are basically an attempt to turn the market into a “fair gamble” – but it’s not a gamble, or it shouldn’t be, it’s a market. Insider trading should be seen as a source of information, not a species of fraud.

    And if a company’s insiders trade in sneaky manners such pump-and-dump, DON’T BUY THE STOCK. It’s still useful information, it tells you “these shysters have an unprofessional attitude”.

  • In my mind insider trades (as pointed out by a couple of folks above) transmit valuable information that is currently masked. Why not do something like add an ‘insider bit’ to various trade tickers? Or color code them based on how highly placed the insider making the trade is. Somehow make the information that the trade has taken place itself propagate quickly.

    That’d be much better than the current “fill out this SEC form and tell us after the fact” system, which isn’t a lot of use: it delays the insider trade info too much for it to be of much use in the market (not timely), and it won’t stop those who are going to break the rules anyway.

  • ed

    Insider trades, at least those done directly by the person “inside”, is already made public. Frankly I forget where but I know this information is readily available as it is required by the SEC. Additionally the SEC imposes specific rules on when an officer/executive can sell/trade stock.

    Fact is that this “insider information” really can’t be made public. If it could be made public then it would be. Even if it could be made public there will be a delay between the acquisition of the information and the actual posting for the public. Additionally there are also many situations where insider information simply cannot be made public until a later date. An example would be a corporation doing due diligence for a merger, buyout or takeover. They can’t make it public knowledge because that will do add unpredictable swings to the stock prices and make any such action far more difficult.


    “Seems to me that insider trading laws are basically an attempt to turn the market into a “fair gamble” – but it’s not a gamble, or it shouldn’t be, it’s a market. Insider trading should be seen as a source of information, not a species of fraud.”

    So if some executive’s uncle does some insider trading that results in you losing $50,000, you’re ok with that? It’s not fraud, so you can’t sue to recoup your losses. It’s just a market, so you should just suck up the losses. It doesn’t matter that the executive choose when, how and how much to move his stock’s price. It doesn’t matter that his uncle can be primed to do the relevant trades. You’re willing to go along for the ride?

    Might I point out the SEC was created specifically to stop that kind of behavior. A behavior that was rampant in the 1920’s where major financiers could make millions just by deliberately manipulating the stock prices so they could bilk the small investors.

    Hmmm. I’ve got some great stock to sell you in a brand new company called “Ed Co.”. It’s a high technology startup specializing in personalized ratings of adult entertainment venues. Specifically ones involving (semi) naked women, a stage, light show, sound system and ceiling to floor poles.

    Special offer. $2 per share, no maximum, 1,000 shares minimum per customer. Get it before the IPO. I can guarantee the price will hit $10 per share! Only one share will hit that price but it’ll hit that price target! Woot! Join in NOW!


  • R. C. Dean

    So if some executive’s uncle does some insider trading that results in you losing $50,000, you’re ok with that?

    How is your loss is a result of someone else’s greater information, in any real sense of the term? In modern markets, you have no clue who is on the other side of any trade, or why they decide to take the other side of your trade.

    You will have made a decision to buy or sell stock that is totally unconnected to the insider’s decision to take the other side of the transaction. How exactly does his well-informed decision to trade “result in” your taking a loss on your completely independent, if ignorant, decision to trade? If he hadn’t traded, then someone else would have taken the other side of your trade anyway, and your loss would have occurred regardless. Your loss is a result of your decision to trade, and nothing else.

    Insider trading is not really fraud, and does not cause losses to anyone else in any strong sense of the word. Indeed, there is no principled difference, from the viewpoint of market dynamics, between an insider trade and a well-researched trade. Both are trades based on superior information. Insider trading is based on the notion that there is a fiduciary duty owed to shareholders by company directors and other agents.

  • Jonathan

    How exactly does his well-informed decision to trade “result in” your taking a loss on your completely independent, if ignorant, decision to trade?

    Because the rules of the game outlaw insider trading, and you therefore can rationally expect that all trades are being made with all players having equal access to all publicly-available information. The price should therefore be “fair” at the time the trade is executed.

    As a society, we have decided that strict prohibition of insider trading encourages greater participation by a broader swathe of society, not all of the members of which wish to dedicate all of their time to researching their stock trades. Society’s interests are well-served by the fact that market participants have efficient access to good information and can focus on their professions without having to worry about what the Old Boys’ network is doing to them.

    It’s fair to use a gun in combat. It isn’t fair to use a gun in a boxing match. Insider trading is fraud because we’ve chosen it to be.

  • none

    The original post is spang on, unfortunately.

    Still more unfortunately, the same post could have been written of many laws in the U.S. these days. Demagoguery is rampant. Don’t like abortion? Go weep to the government! Don’t like “child abusers?” Just whisper a name, and that person will be ruined! Want a brain-dead individual kept alive? To h@ll with the constitution–your local Bush will be happy to sign a law tailored just for you!

    It is one of the more painful ironies of American politics that the very same voters who so clearly intuit the correct path in foreign policy, do not understand the threat from domestic law creep. Only our “law and order, throw the b@stards in jail” types, have any understanding of the realities of international power politics.

    Luckily, Bush’s foreign policy is run by people who understand the important of displaying power. I am looking forward to voting for Condoleeza Rice in 2008. But unfortunately Dubya himself seems never to have met a law he didn’t like.

  • Tim Sturm

    Jonathan wrote:

    “Because the rules of the game outlaw insider trading, and you therefore can rationally expect that all trades are being made with all players having equal access to all publicly-available information. The price should therefore be “fair” at the time the trade is executed.”

    The usual meaning of the term “fair” is as in “fair value”, which refers to the share price being in line with the actual value of the company’s operations. Therefore if insider trading is permitted, then uninformed investors can be sure that the share price is closer to fair value than if it wasn’t permitted, since insiders obviously have the best idea of what the fair value is and will trade accordingly.

    The concept of “fairness” as you imply it (ie. equality of information) isn’t the issue. Insider trading is only a problem in terms of corporate governance – ie. the potential conflict between control over the company’s operations and part-ownership of the company’s equity.

  • Jonathan

    Hi Tim:

    Therefore if insider trading is permitted, then uninformed investors can be sure that the share price is closer to fair value than if it wasn’t permitted, since insiders obviously have the best idea of what the fair value is and will trade accordingly.

    You, and many of the pro-inside-traders posting above, seem to ignore the issue of timing. I am pretty sure that the market will find the true value of any given share sooner or later in both situations, and certainly faster in the situation where insider trading takes place, but I am more concerned the process by which the market finds the true price.

    In the Martha Stewart example, she sold on the basis of insider information to a sucker who bought believing he had access to all the same information to evaluate as anyone else did, and who ended up taking a bath.

    In the insider-trading-free scenario both parties have an equal chance at the chair (supernormal profits) when the music stops (previously-undisclosed information is disclosed publicly to all participants at once).

    Ask yourself whether it’s socially useful for would-be investors in all walks of life to dedicate hours of their every week to insider research in order to be assured a market rate of return on their investments. I don’t think it is.

  • Johnathan Pearce

    The problem with Jonathan’s point above about “public access” is drawing the distinction to where a person has superior information about a stock because he/she works for said firm, and when he/she has that information gleaned some other way. For example, if I discover by some means that GM could lose a lawsuit over its car safety, I have an “unfair” advantage over an investor who relies on whatever he can see in the media and so on at the time.

    To repeat, by all means let’s hammer people for fraud and theft. Let’s come down like a ton of bricks on the malefactors. By all means encourage firms to insist on high ethical standards and fire the bad guys when they mess up. But above all, let’s have some clarity in what we mean by “insider trading”. I just cannot see how this can happen, given the vague nature of what insider trading is supposed to be. Comment threads like this surely prove that very point.

  • ed


    Y’all do know that when you buy or sell stock that it’s more akin to buying and selling in a flea market than in an established retail outlet right? In the latter situation a price is set and you either use that price or you don’t trade. In the former you get to set the price and, if someone else meets it, then you trade.

    “Insider trading is not really fraud, and does not cause losses to anyone else in any strong sense of the word. Indeed, there is no principled difference, from the viewpoint of market dynamics, between an insider trade and a well-researched trade.”

    Completely incorrect and utterly wrong.

    Let’s say we have a mining company that specializes in mining precious metals. According to the public data this companie’s holdings are starting to play out and the difficulty, and cost, of extraction will now rise to a point where the profit margin will be squeezed greatly. Under this circumstance you’d probably look at selling this holding and moving on to another more promising stock. Yet an insider has access to private data that shows the company has actually just hit another major vein. This data has not yet been made public, so it’s not available to you nor to anyone else, but it is available to the insiders of this mining company.

    Can I make this point any clearer? Insider trading relies entirely upon possession of timely information that is not available to YOU. If you don’t own the stock then you don’t take a loss. If you do own the stock and decide, based on public information, to sell then the loss is to YOU.

    Here’s an example.

    You own a piece of land that comes to you from a dead relative. From what you know it’s worthless but the lawyer handling the estate has a secret document that shows that there is a large deposit of oil under th property. You are convinced, according to the information that is available to you, that the land is worthless and decide to sell it for a pittance. The lawyer buys the property and promptly makes tens of millions of dollars on it from selling the oil rights.

    This would make you happy right? You wouldn’t scream fraud because it’s not really fraud. It’s a situation exactly similar to insider trading and you don’t believe that insider trading exists. After all the value of the property does eventually reach it’s correct value, it’s just that you don’t get to profit from it. So you’re out a huge amount of money and looking at making your next month’s bills with complete happiness in the sure and certain knowledge that having privledged information and acting upon it is ok by you.

    Sure. And there are porcine aviators.

  • Tim Sturm

    “Ask yourself whether it’s socially useful for would-be investors in all walks of life to dedicate hours of their every week to insider research in order to be assured a market rate of return on their investments.”

    Unfortunately social usefulness isn’t a criteria I’m prone to consider.

    But why should people in all walks of life be would-be investors in the first place? Haven’t they heard of the division of labour…?

  • rkb

    I disagree that the case against Stewart is thin. Setting aside what one believes the laws should require, there’s no doubt that she knows WHAT they require and how to skirt the edges – she holds a broker’s license.

    The claims she’s made on TV of being just flumoxed about the whole thing are bs.

  • Jonathan


    I am content to define it as making trades based on information the public could not reasonably have gotten hold of. If you spend your days watching a particular reactor and notice one afternoon that its core his gone supercritical, you are entitled to short its stock.

    If, on the other hand, you happen to be sleeping with the CFO and she intimates that they’re about to be sued for leaking radiation, and you trade on that information, I’d hope you’d end up sharing a cell with Martha. Assuming you’d prefer that to a lethal injection, that is.

    Tim: Unfortunately social usefulness isn’t a criteria I’m prone to consider.

    To begin with, you Brits are the ones who are supposed to school us Americans in grammar. “Criteria” is a plural noun.

    That’s kind of a huge admission, though, isn’t it? Even the most rapaciously Darwinist free-market capitalist can say with a straight face that he (or she) advocates that system which causes the greatest good to the greatest number of people (though some much more than others).

    If you don’t care about the concept of social usefulness, you seem pretty agnostic as to the various forms of government on the buffet, no?

  • Tim Sturm


    The concept of social good is not one I am prepared to consider in terms of govt policy. I advocate free markets because they are consistent with individual rights, or just ‘rights’, since there isn’t any other type.

    The fact that capitalism also provides the greatest good for the greatest number is an outcome of rights, but does not form a moral basis for it (although not all libertarians would agree with me on that).

    It is not just a matter of indifference; govt policy that starts out with a social good mindset inevitably ends with miscreants being frog-marched into gas chambers (metaphorically at least, if not literally).

    (And btw, I’m a New Zealander, not a Brit).